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Water resources management in the Poyang Lake basin have raised the concern of how human activities affect the local hydrological cycle. To address this concern and related issues, a distributed hydrological model-WATLAC (A Water Flow Model for Lake Catchments), was applied to the Poyang lake watershed to study the hydrological response to different landuse change scenarios. Simulations of canopy interception, evapotranspiration and stream flow were modelled and compared from four different extreme landuse change scenarios which were constructed from the landuse 1996 of the Poyang Lake basin. Major results from the modelling study indicate that through interactions of vegetation with soil and surface waters, land-use change can modify the local hydrological cycle and exert a strong biological control of the annual distribution of streamflow in the basin. Due to the discrepancy and great variation of Leaf Area Index, simulated annual interception and evapotranspiration by the scenario of forest land is much larger than the scenarios of agriculture, shrub and grass lands, while stream flow is relative smaller. The increase of forest cover after returning agricultural lands to forest in Poyang Lake basin can effectively reduces the local flood risk in the lake area.